Investment Analysis and Portfolio Management

This article covers various topics related to investment analysis and portfolio management, including equally weighted portfolio returns, bond pricing, CAPM, and more. It also provides investment advice for retired individuals and discusses the benefits and drawbacks of investing in overseas markets. The article concludes with a discussion on expected utility as a useful criterion for investor choice.

Running head: INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
Investment Analysis and Portfolio Management
Name of the Student:
Name of the University:
Authors Note:

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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Table of Contents
1.a) Calculating the equally weighted portfolio returns for the year:........................................2
1.b) Calculating the price-weighted portfolio return for the year:.............................................2
1.c) Calculating the value-weighted portfolio return for the year:.............................................2
1.d) Depicting the investment advice given to father-in-law:....................................................3
2.a) Calculating the current price of each bond:........................................................................3
2.b) Calculating the duration of bond:.......................................................................................3
2.c) Calculating the convexity of each bond:.............................................................................4
2.d) Calculating new bond price:...............................................................................................4
2.e) Calculating duration of new bond:......................................................................................5
3.a) Calculating simple arithmetic average annual return:.........................................................5
3.b) Calculating beta of Lamb Ltd:............................................................................................5
3.c) Calculating CAPM for the stock:........................................................................................6
4.a.i) Identifying two benefits and two drawbacks of an Australian investor investing in
overseas:.....................................................................................................................................6
4.a.ii) Depicting the overseas country adequate for investment:...............................................7
4.b.i) Calculating percentage return:..........................................................................................7
4.b.ii) Depicting the rate in which return will be zero:..............................................................8
5.a) Calculating annual percentage return:.................................................................................8
5.b) Calculating portfolio standard deviation:...........................................................................9
5.c) Depicting the condition where assets in the portfolio is negatively correlated:.................9
5.d) Depicting how expected utility is a useful criterion for investor choice:.........................10
Reference and Bibliography:....................................................................................................11

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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1.a) Calculating the equally weighted portfolio returns for the year:
Particulars Value
D ltd 4.00%
E ltd 10.00%
F ltd 25.00%
Equally weighted portfolio return in % 13.00%
1.b) Calculating the price-weighted portfolio return for the year:
Particulars Value at 0 Value at 1
D ltd 25 26
E ltd 10 11
F ltd 8 10
Average returns 14.33 15.67
Price-weighted portfolio return 9.30%
1.c) Calculating the value-weighted portfolio return for the year:
Particulars Value at 0 Value at 1
D ltd 50,000 52,000
E ltd 30,000 33,000
F ltd 40,000 50,000
Total value 120,000 135,000
Value-weighted portfolio return 12.50%

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1.d) Depicting the investment advice given to father-in-law:
From the overall evaluation it could be understood that high growth investment for
the retired individual it is mainly not needed. Instead fixed deposit could be conducted for the
father in law to generate a profitable return each year from the deposit conducted in the bank.
Moreover, investment in government bonds could also be conducted, which might help in
generating a risk less a return from the investment (Akimova, Stein and Prokhorova 2015).
Therefore, being a retired personnel constant income is required to continue with their life,
where the person does not need to work again.
2.a) Calculating the current price of each bond:
Particulars Value
Face Value 1,000,000
Coupon Rate p.a. 4%
Half Year Coupon Rate 2%
Coupon Payment 40,000
Yield Rate 6.0%
Half Yearly Yield Rate 3.00%
Total Period 3
No. of Coupon Payments 9
Market Price of Bonds 1,077,861
2.b) Calculating the duration of bond:
Time Cash flow Rate PV of CF PV of CF * t

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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1 40,000 0.88 35,087.72 35,087.72
2 40,000 0.77 30,778.70 61,557.40
3 1,040,000 0.67 701,970.38 2,105,911.13
767,836.80 2,202,556.25
Duration 2.87
2.c) Calculating the convexity of each bond:
Convexity
Time
(t)
Cash flow PV(CF) t + t^2 (t + t^2) x PV(CF)
Coupon 4% 1 40,00
0
40,00
0 2
80,00
0
YTM 6% 2 40,00
0
40,00
0 6
240,00
0
Maturit
y
3 3 1,000,000 1,000,000 1
2
12,000,000
Price 1,000,00
0
Sum: 1,080,000 12,320,000
Convexity: 11.4
1

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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2.d) Calculating new bond price:
Face Value 1,000,000
Coupon Rate p.a. 4%
Half Year Coupon Rate 2%
Coupon Payment 40,000
Yield Rate 6.2%
Half Yearly Yield Rate 3.10%
Total Period 3
No. of Coupon Payments 9
Market Price of Bonds 1,069,749
2.e) Calculating duration of new bond:
6.20%
Time Cash flow Rate PV of CF PV of CF * t
1 40,000 0.94 37,664.78 37,664.78
2 40,000 0.89 35,465.90 70,931.80
3 1,040,000 0.83 868,279.98 2,604,839.95
941,410.66 2,713,436.53
Duration 2.88
3.a) Calculating simple arithmetic average annual return:
Year ended 30 June lamb Ltd Risk free rate Market
2015 18% 3.40% 22%

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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2016 19% 3.10% 20%
2017 11% 2.50% 15%
Arithmetic average 16% 3% 19%
3.b) Calculating beta of Lamb Ltd:
Year ended 30 June lamb Ltd Risk free rate Market
2015 18% 3.40% 22%
2016 19% 3.10% 20%
2017 11% 2.50% 15%
Beta of Lamb 1.12
3.c) Calculating CAPM for the stock:
CAPM 16.44%
Current price 10
Expected future price 11.64
1 year buy price 12
loss in transit (0.36)
Total loss (711.54)
No investment needs to be conducted as the expected return is relatively lower than
the quoted future price.

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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4.a.i) Identifying two benefits and two drawbacks of an Australian investor investing in
overseas:
The Australian investors have relevant advantage and disadvantage investing in overseas
market, which could help in generating higher returns from investment. The overall
advantage of investing in overseas market are depicted as follows.
 International exposure could allow the Australian investors to access a large and moon
where is Investment opportunity, which could directly increase wealth and returned from
investment (Albuquerque, Gaspar and Michel 2015).
 Australian investors could directly use the oversea market to hedge their portfolio and
reduce any kind of risk from investment.
The major disadvantage for the Australian investors investing in international equity are
depicted as follows.
 The fees for international equity management fund could be high for the Australian
investors which could reduce attractiveness from the international equities.
 The cost involved in setting up the accounts in overseas market is a relatively unknown
by the Australian investors, which directly increases the risk from investment (Borodin
and Chentsov 2016).
4.a.ii) Depicting the overseas country adequate for investment:
From the overall evaluation the overseas market such as Singapore and India could be
an adequate investment option for Australian investors. The overall economic growth of both
the countries is relatively booming providing higher returns every year.
4.b.i) Calculating percentage return:
Amount in AUD 1,000,000

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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Buying price 80
EUR/AUD 1.5
AUD/EUR 0.67
Amount in EUR 666,667
Number of shares bought 8,333
Selling price 90
Amount in EUR 750,000
EUR/AUD 2
Amount in AUD 1,200,000
Returns 20%
4.b.ii) Depicting the rate in which return will be zero:
Amount in AUD 1,000,000
Buying price 80
EUR/AUD 1.5
AUD/EUR 0.67
Amount in EUR 666,667
Number of shares bought 8,333
Selling price 90
Amount in EUR 750,000
EUR/AUD 1.33
Amount in AUD 1,000,000
Returns 0%

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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At AUD 1.33333 rate the return will be zero.
5.a) Calculating annual percentage return:
Particulars Deakin Ltd Hall Ltd
Weight 75% 25%
Returns 8% 10%
Expected return 8.50%
5.b) Calculating portfolio standard deviation:
Particulars Deakin Ltd Hall Ltd
Weight 75% 25%
Standard Deviation 9% 11%
Correlation 0.30
Covariance 0.003
Standard Deviation 8.02%
5.c) Depicting the condition where assets in the portfolio is negatively correlated:
The overall construction of negatively correlational stock in the portfolio mainly
allows the investor to adequately hedge its exposure in the capital market. The investor with
the help of negatively correlated stock into the portfolio is mainly able to obtain a riskless
portfolio, where relevant risk from investment will substantially reduce. However, the same
instance will not be conducted in the above portfolio, as the relevant weightage of the
portfolio stocks are different with altering risk (Damodaran 2016). Hence, the reduction in

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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risk of the portfolio could mainly allow the investor to reduce the negative impact from
capital market.
Particulars Deakin Ltd Hall Ltd
Weight 75% 25%
Returns 8% 10%
Standard Deviation 9% 11%
Correlation (1.00)
Covariance (0.010)
Standard Deviation 4.00%
5.d) Depicting how expected utility is a useful criterion for investor choice:
The overall expected utility is mainly identified to be an economic term, which
directly summarizes the overall utilities, which could be obtained by the economy in near
future. The overall expected utility is mainly identified to be a likelihood or probability that
will occur in near future and generate higher return for the investors. For example, if the
investor is certain for an economic growth in the country, he/she would directly increase the
relevant investment, which could help in generating higher returns (King and Ganotice 2014).
The second example indicates an investment conducted by investor before the announcement
of major government bill could also be considered under expected utility by the investors.

INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT
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Reference and Bibliography:
Akimova, E.M., Stein, E.M. and Prokhorova, Y.S., 2015. System Analysis in the Investment
Processes Management and Theoretical Principles of the Investments Assessment. Journal of
Advanced Research in Law and Economics, 6(3 (13)), p.472.
Albuquerque, R., Gaspar, R.M. and Michel, A., 2015. Investment Analysis of Autocallable
Contingent Income Securities. Financial Analysts Journal, 71(3), pp.61-83.
Bodie, Z., Kane, A. and Marcus, A.J., 2014. Investments, 10e. McGraw-Hill Education.
Borodin, A.I. and Chentsov, A.S., 2016. Model of the design and investment analysis on the
basis of qualitative characteristics. Bulletin of the Udmurt university. Economy series and
right, 26(4), pp.11-19.
Chen, L., Wang, Y., Lai, F. and Feng, F., 2017. An investment analysis for China's
sustainable development based on inverse data envelopment analysis. Journal of Cleaner
Production, 142, pp.1638-1649.
Chisholm, D., Sweeny, K., Sheehan, P., Rasmussen, B., Smit, F., Cuijpers, P. and Saxena, S.,
2016. Scaling-up treatment of depression and anxiety: a global return on investment
analysis. The Lancet Psychiatry, 3(5), pp.415-424.
Coleman, M.S., Marienau, K.J., Marano, N., Marks, S.M. and Cetron, M.S., 2014.
Economics of United States tuberculosis airline contact investigation policies: a return on
investment analysis. Travel medicine and infectious disease, 12(1), pp.63-71.
Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and
corporate finance (Vol. 324). John Wiley & Sons.

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DeFusco, R.A., McLeavey, D.W., Anson, M.J., Pinto, J.E. and Runkle, D.E.,
2015. Quantitative investment analysis. John Wiley & Sons.
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analysis of gender differences in student motivation. The Asia-Pacific Education
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A multi-objective, return on investment analysis for freshwater conservation
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